Analysis of the relationship between sustainability scores and financial performance of the companies in the BIST sustainability index

Abstract

Purpose- The inclusion of companies in the BIST Sustainability Index and the disclosure of sustainability scores provide not only benefits in terms of making companies’ sustainability practices better known by stakeholders and the public, but also may increase stock returns. Therefore, this study aims to analyse the relationship between sustainability scores and financial performance of companies in the BIST Sustainability Index. Methodology- In order to analyse the relationship between the sustainability scores of 62 companies in the BIST Sustainability Index and their financial performances, the sustainability scores of the companies and the companies' firm value, return on assets and stock rate of return as the financial performance indicators is examined by multiple regression analysis method over the data of 2022. Findings- A negative relationship was found between the sustainability scores of the companies and the firm value, while no significant relationship was found between the sustainability scores and the other financial performance indicators, namely return on assets and stock rate of return. Conclusion- The reason for the negative relationship between the sustainability scores of the companies and the firm value may stem from the investors’ perception that the environmental investments to be made by the the company will increase the company's costs, which will have a negative impact on the company's financial statements and thus on the stock return. Keywords: Sustainability, sustainability scores, financial performance, multiple regression analysis. JEL Codes: E44, G11, G32